MS Win in Moto Patent Case Could Mean Big Money

Motorola Mobility did not live up to its promise to charge fair and reasonable prices for its standard essential patents, a federal court ruled this week. The jury awarded Microsoft $14.5 million in damages, but the bigger win will be the reduced licensing fees Redmond will have to pay. Motorola was asking $4 billion for some of the licenses, but that number was whittled down to $1.8 million.

By Erika Morphy
09/06/13 10:08 AM PT

A federal court in Seattle this week upheld Microsoft's claim that Motorola Mobility refused to license its standard essential patents at a fair and reasonable cost, resulting in an award to Microsoft of US$14.5 million in damages, according to media reports.

Microsoft claimed that the license fees Motorola Mobility initially demanded for its patents were exorbitant and not in keeping with its promise to standards-setters to charge reasonable and nondiscriminatory terms.

This court decision followed a win last year by Microsoft in a related suit, which also took place in the U.S. District Court in Seattle. In that case, the judge found that Motorola had requested license fees for wireless and video patents used in the Xbox game console that were far too high -- clocking in at 2.25 percent of the product price.

Though it received only half of what it had requested in damages this time around, Microsoft said it was pleased with its victory.

"This is a landmark win for all who want products that are affordable and work well together," the company said in a statement provided to the E-Commerce Times by spokesperson Brittany Bolz. "The jury's verdict is the latest in a growing list of decisions by regulators and courts telling Google to stop abusing patents."

An Injunction, Some Legal Fees

A large part of the damages Microsoft was awarded related to the costs the company incurred fighting Motorola Mobility.

Microsoft reportedly had to spend $11 million to relocate a warehouse in Germany after an injunction was placed on certain Microsoft products. Microsoft also spent about $3 million fighting the injunction, which had been brought by Motorola Mobility.

"We're disappointed in this outcome, but look forward to an appeal of the novel legal issues raised in this case," Motorola Mobility spokesperson William Moss told the E-Commerce Times.

A Common Tale

For patent watchers, Microsoft's claims in this case have a familiar ring to them.

The drill is this: Tech companies are eager to participate in the standards-setting process for various products and components. In exchange, if their patents are used, they are expected to license them at a fair and reasonable rate. However, in the hyperlitigious world the patent arena has become, this process is breaking down.

Some companies are clearly withholding licenses for standard-essential patents for competitive purposes. On the other side of the equation, some license seekers are just as clearly trying to make an end run around legitimate patent holder rights by waving the banner of FRAND, the acronym for "fair, reasonable, and non-discriminatory" terms in licensing.

'Patent Misuse'

Patent law does account for such games, technology and intellectual property lawyer
Douglas Panzer, told the E-Commerce Times.

"There is a doctrine called 'patent misuse,' which is analogous to antitrust; it essentially says that companies or individuals that hold patents that are keys to the kingdom -- standard essential patents -- cannot use those patents to hold businesses hostage until they get the terms they want or to exclude others by not licensing those patents," he explained.

In short, Panzer concluded, "patent law says that if a patent holder doesn't negotiate in good faith, it is tantamount to a violation of antitrust law."

Courts Increasingly Aware

What is notable about this case is that it suggests the courts are finally starting to pay attention to this possibility, Peter Toren, a partner with
Weisbrod Matteis & Copley,
told the E-Commerce Times.

"I think in general the courts are taking more seriously allegations of FRAND abuse, and that is reflected in this case," Toren said.

Indeed, some observers believe this case could be a pivotal turning point in establishing fair and reasonable license fees for standard essential patents.
The case also points to an increased aggressiveness by Microsoft in the court system.

"Historically Microsoft has not been that aggressive in using its patents in this manner, at least not compared with other tech companies," he noted.

In this case, Microsoft has potentially saved itself billions of dollars in license fees by contesting Motorola Mobility's claims. Originally, Motorola demanded annual fees of $4 billion for some of the licenses Microsoft had been seeking. That number was subsequently whittled down to $1.8 million.